A recent survey
carried out by the National Council for Voluntary Organisations suggests that charities may suffer the worst effects of the recession in 2010. Charity leaders are concerned that the impact of government cuts, which make up approximately a third of the sector’s income, will only be fully felt this year. Those that are heavily reliant on government support are likely to have to find income from elsewhere, form strategic partnerships or merge with other charities.
In 2009, the number of charities in the UK fell by approximately 8,700, leaving 159,600. Although many charities made significant cutbacks in terms of personnel, and there were numerous mergers, charities that had a sound management infrastructure generally survived. Charities generally were found to have been resilient to the effects of the recession, having learned from previous periods of economic difficulty. This enabled them to make changes at an early stage of the downturn.
Many charities reported positively in terms of new legacies and legacy income, although estates in which property had to be sold were accepting lower offers. However, the decline in equity values from the 2007 high had a significant impact on the value of bequests in the form of share portfolios. It is, however, difficult to gauge accurately the full effect of these factors on charity income because of the length of time it takes for estates to be wound up and distributed.
Charities reported that approximately 27 million individuals in the UK Giving Survey confirmed that they gave monthly to a charity in the year ending April 2009. This was approximately 774,000 fewer than in the previous year. Large donations were also reported to have decreased significantly. Whether attributable to the recession or not, charities are also showing an increased propensity to litigate over contested wills.
Looking ahead to the next twelve months, many charities anticipate that the general election will have an effect on public sector funding. In addition, the implementation of the new 50 per cent tax bracket is likely to see a significant number of very wealthy individuals setting up their own charities, preferring to give their money to charitable causes than the Government.